Study Suggesting Costs to Paid Sick Leave in Connecticut May have Bearing on Washington State Proposal

 
 

Attorney, Paradigm Counsel

"Everybody benefits.” That’s what proponents of Connecticut’s first-in-the-nation state paid sick leave law told legislators and the public during the debate that preceded the law’s passage. Business owners weren’t so sure—public hearings on the legislation contained testimony from a number of businesses concerned about the effects of the law on their operations.

The state’s sick leave law took effect at the beginning of 2012, and the point of this study is to capture businesses’ early experiences with and reactions to the law. Were the concerns expressed early on during the legislative debate worth considering, or was it just business owners “crying wolf ”?

Between April and October of 2012, we surveyed a broad list of business owners provided to us by the Connecticut Business and Industry Association and Connecticut Restaurant Association, and conducted in-depth follow up interviews with four of the responding businesses. The results should not be interpreted as being representative of the experience of all businesses in the state, but indicative of some of the challenges that businesses in a wide range of industries have faced while implementing the law.

Of the 156 businesses that responded to the survey, 86—or 55 percent—had started providing sick leave to comply with the new law. Prior to the law taking effect in January 2012, 31 of the businesses surveyed had scaled backed on employee benefits or reduced paid leave (or both) to account for the cost of the new law. Twelve had cut back employee hours, and another six reduced employee wages.

Nineteen businesses raised consumer prices, six laid off employees, and three converted part-time positions to full-time positions. Sixteen businesses indicated they had decided to limit or restrict their expansion within the state.

Perhaps more concerning were the future actions that state businesses were likely or highly likely to take in response to the law: Thirty-eight businesses said they would hire fewer people as a consequence. Other actions included offering fewer raises, scaling back on overtime, raising prices, and increasing the cost of other benefits like health insurance. Also surprising was the perception of the public health problem the law was intended to solve. Contrary to rhetoric used during the campaign, nearly 90 percent of all responding businesses indicated that sickness in the workplace was not a serious problem prior to the law taking effect; just 3 businesses described it as a serious problem.

Employers were also skeptical of the projected savings from the law. Of the employers in Connecticut that started providing sick leave, only two responded that it would reduce employee turnover, and another two anticipated that it would increase employee productivity.

Forty-six businesses worried that the law would increase unscheduled absences in their workplace. One of the companies surveyed already had experience with this phenomenon, where employees call out sick on Monday and make a “miraculous recovery” the following day. Perhaps most telling was that, of the 83 employers who responded to the question of whether the law was good for their business, 57 of them—or 69 percent—said it was not.

Even for businesses not affected by the law economically—like the utility company that participated in the follow-up survey—the law created a new liability, or “another thing employees can sue us over.”

During the follow-up interviews, business owners expressed frustration with the “employers vs. employees” narrative that was put forth during the debate. One restaurateur said his business “always took care of its people,” and that the lack of a paid policy was never an issue until labor unions decided to make it one. The owner of a daycare center was upset at the notion that he forced employees to choose between their jobs and their health: “Everybody’s happy—some of my employees have been here 20, 25 years. If things were so terrible, I wouldn’t have that kind of longevity.”

A full accounting of the law’s impact will take additional time, and this study makes no claim of being representative of the broader Connecticut business population. But it does suggest that the law has not been a cost-free endeavor, and that there have been consequences for both employers and employees as a result. Other cities and states considering similar laws should take these consequences under consideration.

On Reflection: Corporate Game Changer

On Reflection: Corporate Game Changer

Gamification software from a UW startup makes biz-school case studies more authentic.
| FROM THE PRINT EDITION |
 
 

Imagine you’re the CEO of an airline in crisis. Customers and shareholders are unhappy. Your employees have just gone on strike. What do you do? Give in to union demands? Hold your ground and negotiate? Fire all the employees? 

It’s the first of a cascading set of decisions you must make in The Signature Case Study, a new interactive game developed by Seattle-based Recurrence (recurrenceinc.com) in partnership with the University of Washington’s Center for Leadership & Strategic Thinking (CLST). Players take one of five C-suite roles and each player’s decision changes the options available to the others and affects their total scores based on employee, shareholder and customer satisfaction.

The Signature Case Study takes the case-study method, a paper-based system pioneered by the Harvard Business School, and uses game techniques to make it more entertaining and accessible while also giving students and teachers immediate feedback on the quality of their decision making.

Data on 19 variables derived from real airlines on things like lost luggage, fuel costs, stock prices and customer satisfaction are built into algorithms that drive the game and can result in thousands of academically validated outcomes.

CEO and co-inventor Brayden Olson named the company after Friedrich Nietzsche’s doctrine of eternal recurrence, the notion that all life will repeat itself through eternity. The interactive case study, he says, allows people to learn from mistakes and develop critical thinking skills that improve their judgment so they won’t make similar mistakes in real life.

While traditional case studies depend heavily on the skills of professors to engage students, The Signature Game Study’s software uses game elements to require interactivity, says co-inventor Bruce Avolio, a professor of management at the UW’s Foster School of Business and executive director of CLST.

The game shows players how decisions made early on can narrow their course of action down the road. They also learn the importance of teamwork to overcome the toughest challenges. “Great games can be both more fun and more challenging,” says Avolio, who sits on Recurrence’s board of directors.

The product, released early this year, has already been adopted at more than 30 schools, including the UW, Stanford, Penn State, Johns Hopkins and the University of Texas, to teach leadership, organizational behavior and strategy. The cases sell for $47.50 per student; Recurrence is looking to add cases in areas such as operations, finance, marketing and entrepreneurship. It’s also working with the University of Alabama nursing school to develop a case study to teach such skills as diagnosis and health care management.

With more than 15,000 business schools in the world, Olson says the market is huge. He notes that publishers of printed case studies are selling 12 million a year, but they recognize that the interactive case study is the future and are looking for Recurrence’s assistance in developing them.